America’s financial future hinges on how lawmakers deal with Medicare. The program’s budget shortfall over the next 75 years is an astonishing $38 trillion, according to a recent report from the Medicare Trustees. If left untouched, Medicare’s costs will continue to spiral out of control, comprising an ever-greater share of the economy and undermining growth.
The Obama administration appreciates the magnitude of this problem — the new healthcare law does attempt to address Medicare spending. Unfortunately, one part of its solution could prove ineffectual, as it targets the wrong components of Medicare and gives too much policymaking power to unaccountable officials.
The health reform bill establishes an Independent Payment Advisory Board (IPAB) to make recommendations on how to cut costs in Medicare. IPAB members will be appointed by the President. And their recommendations automatically become law unless there’s a Congressional override.
One of the biggest limitations of the IPAB is that it doesn’t have any power over the parts of Medicare that are really driving costs. In fact, over 50 percent of Medicare providers are actually exempt from cuts during the first decade of IPAB’s existence.
Medicare Part A, which covers in-patient hospital stays, is exempt. But it’s so expensive that its reserves will be empty by 2017, according to the Medicare Trustees. By 2035, the program’s revenues are predicted to only cover half of promised benefits.
Medicare Part B, which covers out-patient services, also gets a free pass. Part B’s costs have become so high that administrators recently raised premiums on nearly a quarter of its enrollees. Analysts from the Congressional Research Service found that without a substantial increase in Part B premiums, the fund that finances the program would be “at risk of exhaustion.”
It’s also problematic that the IPAB doesn’t have to include any representatives from the patient population that will be most impacted by its decisions — seniors.
IPAB will likely have authority to raise premiums and co-pays, cut enrollee benefits, adjust eligibility requirements, and lower reimbursement rates for participating doctors and hospitals — all with effectively zero congressional check.
And the IPAB is required to achieve Medicare cuts on a yearly basis. The drive to generate significant savings over such a relatively short period could lead to arbitrary payment cuts, coverage restrictions, and other short-sighted cost-cutting measures. These kinds of policies will limit beneficiaries’ access to top-notch treatments and doctors.
Before the healthcare bill passed, Medicare spending cuts were ultimately Congress’ responsibility. Changes were made in a transparent and open way. Lawmakers were given the opportunity to balance various policy goals. And stakeholders had the opportunity to share their concerns and ideas.
Delegating such authority to an unaccountable body like IPAB, though, undermines the role of Congress.
An independent commission with the power to cut Medicare costs is a good idea. But there needs to be some mechanism in place to assure the agency is more accountable to voters and more sensitive to senior health needs. And the commission has to have power over the most costly parts of the public health system.
Without these changes, IPAB could compromise seniors’ health, while doing little to navigate Medicare off the road to financial ruin.
Robert B. Blancato is the executive director of the National Association of Nutrition and Aging Services Programs.
